Nomura sees signs of recovery in capex cycle

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Nomura said new projects investment rose to 4.9 per cent of GDP in the December quarter (Reuters) Nomura said new projects investment rose to 4.9 per cent of GDP in the December quarter (Reuters)
SummaryJapanese firm said new projects investment rose to 4.9 per cent of GDP in the December quarter

Brokerage Nomura today said there are signs of economic recovery following stabilisation in the trend of falling new investments and underlined the need for capex increase by the private sector to restore normalcy in business activity.

Quoting data from the Centre for Monitoring Indian Economy (CMIE), the Japanese firm said new projects investment rose to 4.9 per cent of GDP in the December quarter, which is up from 3.6 per cent in Q3. Neither of the agencies offered an absolute number of the investments in ongoing projects.

"New investments have fallen almost continuously since peaking in 2007 and this data suggest very early signs of a stabilisation, albeit at low levels," Nomura said in a note.

However, it pointed out that for the private sector, the new investments have fallen to 0.6 per cent in Q4 as against 1.4 per cent in Q3 and said the uptick in investment activity is led by the state-run companies (4.2 per cent of GDP in Q4 as against 2.1 per cent in Q3).

"Private sector investment projects will have to rise for a broad-based and a more sustainable pick-up in the capex cycle, which in our view is still some way off."

The government has been trying hard to revive the investment cycle. It has set up a Cabinet Committee to speed up investment flows after clearances to projects was found out to be one of the biggest factors inhibiting capex.

The panel has so far cleared 125 projects, involving an investment of over Rs 4 lakh crore, over the past few months, while another Rs 14 lakh crore worth projects are stuck for want of clearances.

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